ESG reporting is the new norm for modern business
April 13, 2022
ESG is no longer a nice to have but a must have. Incorporating the Environmental, Social and Governance (ESG) aspects of conducting business into corporate reporting cycles is becoming an essential accompaniment to financial and organisational performance measures. The notion of “optional transparency” is no longer sufficient as expectations from investors, customers, employees and interested stakeholders on ESG issues continue to rise.
ESG reporting is a broad term capturing a range of factors relating to non-financial disclosure, including carbon emissions, water and land management, human rights, diversity and equality, executive remuneration, and more. ESG reporting serves as a benchmark for a company’s non-financial performance that investors use to screen potential investments, and is becoming the industry standard with 80% of the ASX 200 reporting on ESG performance to stakeholders in 2019.
The benefits of developing a strong basis for ESG reporting include boosted customer and employee engagement, attraction and retention of talent, improved social licence, reduced operational risk and, increasingly, enhanced investment return.
Good ESG reporting discloses commercial risks and opportunities to show how they are guiding future business strategy. Business risks could include biodiversity loss, extreme weather, water and food insecurity, and cyber-attack, while opportunities might range from sustainable impact investment to shared value creation and market capital growth.
Many reporting frameworks are available to guide ESG reporting, including the Global Reporting Initiative, the Task Force on Climate Related Financial Disclosure and the UN Sustainable Development Goals. ESG reporting in some capacity is likely to become mandatory in the near future, with the ASX Corporate Governance Principles and Recommendations already strongly stipulating that: “A listed entity should disclose whether it has any material exposure to environmental or social risks and, if it does, how it manages or intends to manage those risks.”
Shelly Dempsey, writer and editor at the ACID says “Consistent, transparent reporting, particularly by listed entities, allows relevant stakeholders including customers and employees to better understand strategy, risks and drivers of current and future performance.” Ideally, companies reporting on ESG identify a reporting framework that suits them best to address these three areas of impact.
The benefits of developing a strong basis for ESG reporting include boosted customer and employee engagement, attraction and retention of talent, improved social licence, reduced operational risk and, increasingly, enhanced investment return. Further, there is strong evidence that good ESG performance has a statistically significant positive impact on companies’ valuations and margins.
Poor ESG strategy and reporting is increasingly likely to threaten a business through reputational damage, regulatory scrutiny, litigation, and ultimately poor investment and valuation results. A 2020 study by the NYU Stern Centre for Sustainable Business found that strong ESG performance was very rarely correlated with poor financial performance.
Benchmarking against peers and competitors can identify ESG gaps and help align your business’ strategy with a sustainable future. A gap analysis using robust international frameworks will build investor confidence and form the basis of your ESG program and reporting. A full review produces a robust reporting framework suitable for future annual reports and other financial market information.
As sustainability specialists, Cress Consulting is ideally positioned to not only ensure your business satisfies reporting requirements, but to solidify your business as an industry leader in ESG reporting. We know that expert assistance and support can make all the difference. Cress Consulting has joined forces with corporate communication specialists Collier Creative to bring essential and professional skills to the table including, business and communications strategy, ESG expertise, design and copywriting, digital delivery, and measurement. We provide a team of problem-solvers to work with you through the challenges and opportunities that your ESG reporting process uncovers, well after we’ve delivered the report.
Get in touch here to find out how Cress can help your business on the ESG journey.